[Federal Register Volume 63, Number 230 (Tuesday, December 1, 1998)]
[Rules and Regulations]
[Pages 66011-66013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31960]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM93-24-001; Order No. 600-A]
Revision of Fuel Cost Adjustment Clause Regulation Relating to
Fuel Purchases From Company-Owned or Controlled Source; Order Denying
Rehearsing and Other Relief
Issued November 24, 1998.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; Order denying rehearing and other relief.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) denies a
request, filed October 21, 1998, by Pacific Gas and Electric Company,
for clarification, reconsideration or rehearing of the Final Rule,
issued September 21, 1998, in which the Commission amended its
regulations to state that where a regulatory body has jurisdiction over
the price of fuel purchased from a company-owned or controlled source,
and exercises that jurisdiction to approve such price, the Commission
will presume, subject to rebuttal, that the cost of fuel so purchased
is reasonable and includable in the fuel adjustment clause.
FOR FURTHER INFORMATION CONTACT: Wayne W. Miller, Federal Energy
Regulatory Commission, Office of the General Counsel, 888 First Street,
NE, Washington, DC 20426, (202) 208-0466.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in the Public Reference Room
at 888 First Street, NE, Room 2A, Washington, DC 20426.
The Commission Issuance Posting System (CIPS) provides access to
the texts of formal documents issued by the Commission. CIPS can be
accessed via Internet through FERC's Homepage (http://www.ferc.fed.us)
using the CIPS Link or the Energy Information Online icon. The full
text of this document will be available on CIPS in ASCII and
WordPerfect 6.1 format. CIPS is also available through the Commission's
[[Page 66012]]
electronic bulletin board service at no charge to the user and may be
accessed using a personal computer with a modem by dialing 202-208-
1397, if dialing locally, or 1-800-856-3920, if dialing long distance.
To access CIPS, set your communications software to 19200, 14400,
12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex, no parity, 8
data bits and 1 stop bit. User assistance is available at 202-208-2474
or by E-mail to [email protected].
This document is also available through the Commission's Records
and Information Management System (RIMS), an electronic storage and
retrieval system of documents submitted to and issued by the Commission
after November 16, 1981. Documents from November 1995 to the present
can be viewed and printed. RIMS is available in the Public Reference
Room or remotely via Internet through FERC's Homepage using the RIMS
link or the Energy Information Online icon. User assistance is
available at 202-208-2222, or by E-mail to [email protected].
Finally, the complete text on diskette in WordPerfect format may be
purchased from the Commission's copy contractor, RVJ International,
Inc. RVJ International, Inc., is located in the Public Reference Room
at 888 First Street, NE, Washington, DC 20426.
Before Commissioners: James J. Hoecker, Chairman; Vicky A.
Bailey, William L. Massey, Linda Breathitt, and Curt Hebert, Jr.
On October 21, 1998, Pacific Gas and Electric Company (PG&E) filed
a request for clarification, reconsideration or rehearing of the Final
Rule, issued September 21, 1998.1 The Final Rule amended
section 35.14(a)(7) of the Commission's regulations, 18 CFR
Sec. 35.14(a)(7) (1998), relating to fuel adjustment clauses, to state
that where a regulatory body has jurisdiction over the price of fuel
purchased by a utility from a company-owned or controlled source, and
that regulatory body exercises that jurisdiction to approve such price,
the Commission will presume, subject to rebuttal (rather than
conclusively ``deem'') the cost of fuel so purchased to be reasonable
and includable in the fuel adjustment clause. We deny the request for
rehearing and other relief.
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\1\ Revision of Fuel Cost Adjustment Clause Regulation Relating
to Fuel Purchases From Company-Owned or Controlled Source, Order No.
600, 63 FR 53,085 (October 7, 1998), FERC Stats. & Regs. para. 31,
066 (1998) (Final Rule).
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Background
In 1993, the Commission proposed to amend section 35.14(a)(7) of
the Commission's regulations, relating to fuel adjustment clauses, to
state that where a regulatory body has jurisdiction over the price of
fuel purchased by a utility from a company-owned or controlled source,
and that regulatory body exercises that jurisdiction to approve such
price, the Commission will presume, subject to rebuttal (rather than
conclusively ``deem'') the cost of fuel so purchased to be reasonable
and includable in the fuel adjustment clause.2 The
Commission explained that the need for this amendment arises from the
decision of the D.C. Circuit in Ohio Power Company v. FERC, 954 F.2d
779 (D.C. Cir.), cert. denied, 506 U.S. 981 (1992) (Ohio Power). In
Ohio Power, among other things, the D.C. Circuit held that section
35.14(a)(7) establishes a conclusive presumption that a Securities and
Exchange Commission (SEC)-approved price for an inter-affiliate fuel
purchase is just and reasonable and, accordingly, cannot be upset by
the Commission. In analyzing section 35.14(a)(7), the court focused on
the meaning of the word ``deemed,'' finding that it establishes a
conclusive presumption regarding the reasonableness of SEC-approved
prices. The court thus rejected the Commission's position that the word
``deemed'' sets only a rebuttable presumption.3
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\2\ Revision of Fuel Cost Adjustment Clause Regulation Relating
to Fuel Purchases From Company-Owned or Controlled Source, 58 FR
51,259 (October 1, 1993), IV FERC Stats. & Regs. para. 32,502 (1993)
(NOPR).
\3\ 954 F.2d at 783-84.
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As a consequence, the Commission proposed to amend section
35.14(a)(7) to clearly specify only a rebuttable presumption of
reasonableness, making it clear that the Commission has no intention of
abdicating its statutory responsibility to independently review
wholesale rates (including fuel adjustment clauses) to ensure that they
are just and reasonable. The Commission noted a special need for
Commission review when affiliate transactions are involved.
The Commission received 12 comments in response to this NOPR; PG&E
did not submit any comments. While generally in accord with (or at
least neutral to) the intent of the NOPR, the commenters suggested
various changes to the proposed regulation. The suggested modifications
principally involved three concerns: (a) whether the relevant sentence
of section 35.14(a)(7) should simply be eliminated, rather than revised
to set forth a rebuttable presumption; (b) the meaning of the term
``regulatory body'' in the proposed rule; and (c) retroactivity. After
reviewing and considering the comments, the Commission issued its Final
Rule amending section 35.14(a)(7) in the manner initially proposed in
the NOPR.
As relevant here, in the Final Rule, the Commission stated that, as
to challenges to affiliate fuel prices recovered through the fuel
adjustment clause prior to the effective date of this rule change
(November 6, 1998) (and which are not subject to an alternate ground
for decision in Ohio Power), how the Commission should address such
challenges is best decided in each individual case in which the issue
arises, rather than generically in the abstract.4
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\4\ FERC Stats. & Regs. para. 31,066 at 30,727. The Commission
noted that the fuel adjustment clause allows public utilities to
pass through to their ratepayers increases or decreases in the cost
of their fuel, without having to make separate filings to reflect
each change in fuel cost and without having to obtain prior
Commission review of each change in fuel cost. Consequently, the
Commission stated that it has sanctioned after-the-fact review and
refunds in later proceedings. Without later review and the ability
to order refunds, the Commission explained, overcharges collected
through the fuel adjustment clause would be exempt from all scrutiny
and refunds. Id. at 30,727, n.21.
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PG&E's Request
PG&E requests clarification that the Commission did not intend to
apply the new rule to inter-affiliate fuel purchases that occurred, and
were approved by regulatory authorities with jurisdiction over the
purchases, prior to the effective date of the Final Rule. If the
Commission did intend to leave the door open to such retroactive
application, then PG&E requests reconsideration or rehearing. PG&E
contends that any retroactive application of the new rule to inter-
affiliate fuel purchases before the effective date of the Final Rule
exceeds the Commission's authority under the Federal Power Act (FPA),
and the Administrative Procedure Act (APA). PG&E argues that the
Commission may not circumvent this prohibition by implementing a new
legislative rule retroactively in case-by-case
adjudications.5 Additionally, PG&E argues that, because the
NOPR was
[[Page 66013]]
silent on potential retroactive application of the rule, retroactive
application violates the APA's notice and comment
procedures.6
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\5\ PG&E maintains that the precedents cited by the Commission
in footnote 21 of the Final Rule are inapplicable because in none of
those cases did the Commission apply a new legislative rule
retroactively in later adjudications. Instead, PG&E argues, the
Commission retroactively reviewed the reasonableness of costs flowed
through formula rates, applying the same regulations that were in
effect at the time the costs were incurred. PG&E Request at 3.
\6\ 5 U.S.C. 553 (1994).
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Discussion
We will deny PG&E's request for clarification, reconsideration and
rehearing.
We disagree with PG&E that the Commission must clarify or
reconsider the Final Rule at this time because of retroactivity
concerns. In the Final Rule, the Commission did not state that it
necessarily would take any particular action. Rather, the Commission
merely stated that challenges to affiliate fuel prices recovered
through the fuel adjustment clause prior to the effective date of this
rule change are best decided on a case-by-case basis. When the
Commission is presented with a case involving fuel adjustment clause
recovery before the effective date of the Final Rule of the price of
affiliate fuel purchases, the Commission can determine at that time how
best to proceed.
The Commission Orders
PG&E's request for clarification, reconsideration and rehearing is
hereby denied, as discussed in the body of this order.
By the Commission.
( S E A L )
David P. Boergers,
Secretary.
[FR Doc. 98-31960 Filed 11-30-98; 8:45 am]
BILLING CODE 6717-01-P